Political Will, Not Resources, Powers Germany's Energy Revolution

30 years ago, Germany was a country lacking the policy frameworks, infrastructure, and motivation to develop its renewable energy industry. Today, renewable energy powers 27 percent of the country’s electricity (compared to 10 percent in the U.S.).

In response to a shift in public opinion accelerated by the 2011 nuclear meltdown at Fukushima, German Chancellor Angela Merkel closed 8 of the country’s 17 nuclear reactors. Three months later, the German Parliament announced that all plants would be closed by 2022.

In determining why Germany has long surpassed larger countries like the United States and resource-rich countries Japan, one ought to start by examining its recent policies: significant subsidies have provided an attractive and steady investment climate that has turned Germany into the Silicon Valley for the energy industry.

In the mid-1980s, I was occasionally visited in Washington by German energy experts who were intrigued by the boom in renewable energy then underway in the United States. As I explained the policies that had led to the booming use of wind power, solar energy, and other new energy sources, my German guests could only shake their heads sadly. Such a thing, they assured me, could never happen in Germany. The nation’s electricity law was one of the few that had survived from the 1930s, and the country’s business and political leaders were implacably committed to nuclear power.

What a difference three decades can make. The U.S. renewable energy industry collapsed in a wave of bankruptcies in the late 1980s, while Germany has become the undisputed world leader in the technologies and economics of a new energy economy. It is now the only major economy in which solar, wind, and biomass energy contribute a substantial share of the country’s electricity, and heat, even while heavy investment in energy efficiency has reduced the country’s energy needs. If hydropower and biomass are included, fully 27 percent of Germany’s electricity is coming from renewable resources today—compared with 18 percent from nuclear power.

Democratizing Energy Production

The transformation of Germany’s electricity system began in 1990 with the introduction (under a conservative Christian Democrat government) of a new law designed to ensure grid access and fair prices for those who generate renewable power and feed it in to the nation’s electricity grid. This law, lobbied for by Bavarian farmers who wanted to sell their small hydropower to the utilities, was awkwardly called a “feed-in tariff” in English (translated from the German word Einspeisegesetz). Within a few years, it had broken the monopoly of the nation’s electric utilities, and generated an unprecedented wave of entrepreneurial development, investment by German citizens, and decisions by dozens of communities to generate their own electricity.

Over the past two decades, these changes have gathered momentum, with wind power providing most of the new installations in the early years, and solar power growing most rapidly since 2010. The number of “power plants” in Germany has gone from several hundred in 1990 to several hundred thousand today—a thousand-fold increase.

Any possibility of letting up on the accelerator of energy transformation was obliterated on March 11, 2011 with the destruction of two Japanese nuclear reactors. In the days that followed, the German public watched with horror as much of eastern Japan was threatened with radioactive fallout; within 24 hours, Chancellor Angela Merkel had, without informing any of her European neighbors, permanently closed 8 of the country’s 17 reactors. (If she had not, there could well have been a million Germans in the streets by the next weekend.) Three months later, the German Parliament had reversed the decision made just five months before Fukushima to delay decommissioning of the country’s aging nuclear plants and to instead accelerate the drive to energy efficiency and renewable energy.

The new plan reflected for the first time a consensus across Germany’s political parties: all nuclear plants are now required to be closed by the end of 2022—and replaced largely by renewable energy. Marking the occasion, Germany’s government for the first time gave its energy strategy a new name—one freighted with historical reverence: the Energiewende (“Energy Transition” in English), is based on the same word (Wende) that was assigned to the changes that occurred during German reunification and the fall of the Berlin Wall in the 1990s.

Making Room for Innovation

How is it that a country with about as much annual sunlight as Alaska, and a second-rate wind resource (compared with, for example, the United States), could become a world leader in a business that now attracts over $250 billion of capital worldwide each year?

The forces behind Germany’s Energiewende are in some ways easy to understand. The country has a strong technological base both in basic science and advanced mechanical and electrical engineering, supported by a public-private partnership that nurtures young talent from universities to technical schools, and supports them with government assisted research and development. In addition, Germany’s governments have over the past two decades created a framework of energy policies, including significant subsidies, which have provided an attractive and steady investment climate, and led to the creation of hundreds of small companies specializing in various parts of the new energy economy. In the process, Germany has become a sort of Silicon Valley for the energy industry—something that surprises German cynics who used to say that if Bill Gates had been born in Frankfurt, he would today be a mid-level engineer at Siemens.

But why were all of these policies implemented? The mystery is sharpened when you ask why a similar energy transformation has not taken shape in countries that not only share most of the advantages that Germany brings to the new energy game, but that in many cases are blessed with far more abundant renewable resources. Progress to a new energy future has, for example, been far slower in Germany’s neighbors in Europe, most of which have a common Western economic and political history—even in the northern tier of countries that share many of its cultural and economic values.

Political Will Proves More Important Than Resources

The contrast in energy trajectories is even starker when one compares Germany with Japan. The so-called Land of the Rising Sun sits on islands that are blessed with a vast resource of on-shore and off-shore wind, some of the world’s most abundant and accessible geothermal heat, and enough sun to make even southern Germans envious. And like Germany, Japan is a modern democracy and technology powerhouse. Although Japan like Germany committed to heavy reliance on nuclear power in the 1960s, the Japanese public has shifted gradually against nuclear power since the 1980s. But the Japanese establishment (government and industry joined at the hip) has remained wedded to the nuclear dream.

This sentiment became overwhelming after the Fukushima catastrophe, but the Japanese citizenry has always had a limited role in the country’s decision making, most of which is done behind closed doors by the country’s elite. Even today, the country’s power companies—supported by many politicians and government bureaucrats—are fighting to delay the replacement of nuclear power with renewable energy. Japan’s political system now faces an intractable stalemate (including weekly protests outside the Prime Minister’s residence) delaying any clear decision on the country’s energy future. In the meantime, renewable energy’s share of Japanese electricity is at 4 percent—unchanged since 1990. Wind and solar combined provide a fraction of 1 percent of the power.

The tragic political story of Japanese energy failure may hold the key to understanding Germany’s success. The roots of the country’s energy transformation lie in politics, and behind that, in the cultural norms and values that are expressed through its democratic system of government. Germans are well known for their deep love of nature and their efficient, disciplined approach to getting things done. By the mid-eighties, clear evidence emerged that coal-fired power plants were producing acid rain that was sickening the country’s southern forests. Fallout from the Chernobyl disaster in 1986 contaminated some of the country’s vegetable crops and dairy products and ignited opposition to nuclear power.

By the end of the 1980s, the threats of global climate change and ozone depletion had begun to solidify many Germans’ view that a new energy direction was needed. The German Green Party, which first entered the German Bundestag in 1983, rode the new wave of environmental and energy concern to power, joining the Social Democrats in a coalition government in 1998. But it was not only the Greens who decided the country’s energy economy was headed in the wrong direction. Repeated assaults on the German core values of order, risk aversion, and ecological protection have (over two decades, and under four different governments) propelled Germany toward a new energy vision—and more importantly, to its implementation.

A Transition That's Here to Stay

To be sure, there has been opposition to these new energy plans, particularly to their alleged high cost. Even today, the German media is full of controversies about the country’s energy policies. But these frequent political and legal challenges have been repeatedly beaten back by public support for the new energy vision. When the Greens were in government, they accelerated the transition, and when they were out of government, the Christian Democrats maintained the momentum—in part to ensure that the Greens would not once again displace them in the government.

Political differences will almost certainly continue, particularly between the utilities and the increasingly powerful renewable energy industries. The most recent debate on Germany’s energy plans is particularly remarkable: the opposition Social Democrats are now criticizing the current government, not for the direction of its energy policy, but for the “chaotic” way in which it’s being carried out, in particular the slowness with which the electricity grid is being strengthened to accommodate the new energy sources. In response, Chancellor Merkel called an emergency meeting with state governors on November 1 last year in order to reconcile the fact that the cumulative state plans are even more ambitious than the national plan.

The outcome of the meeting was a decision to explicitly recognize that the states are permitted to go at their own pace so long as they coordinate their plans for assuring that the electricity grid is strengthened to accommodate the new energy sources. If history is any guide, what has been called the latest “crisis” by some in the media, is more likely to accelerate the German energy transition than to delay it.

This is a story the world needs to hear—and to be inspired by. Energy transformation is one of the greatest challenges our generation faces. Will we have the wisdom—and the courage—to follow the trail that has been so improbably blazed by one mid-sized country in the heart of Europe?